10-QPeriod: Q2 FY2016

CBRE GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 9, 2016For Securities:CBRE

Summary

CBRE Group, Inc.'s (CBRE) Q2 2016 report indicates significant revenue growth, primarily driven by the acquisition of Johnson Controls' Global Workplace Solutions (GWS) business in September 2015. This strategic acquisition substantially increased revenue across all segments, particularly in Americas and EMEA. Despite the revenue surge, net income saw a slight decrease compared to the prior year quarter, largely due to higher costs associated with integrating the GWS acquisition and cost-elimination projects. Foreign currency fluctuations, particularly the weakening British Pound Sterling, also impacted reported results. While the company highlights strong organic growth in property, facilities, and project management, as well as increased commercial mortgage brokerage and leasing activity, investors should note the increased cost of services as a percentage of revenue, a trend largely attributed to the GWS acquisition's cost structure. The company reiterates its confidence in its liquidity and ability to meet financial obligations through internally generated cash flow and its revolving credit facility.

Financial Highlights

48 data points
Beta

Revenue

$3.21B

99.2% Gross Margin

Net Income

$121.67M

3.8% Net Margin

EPS (Diluted)

$0.36

Total Assets

$9.92B

Cash & Equivalents

$431.77M

Free Cash Flow

$73.03M

Financial Statements
Beta
Revenue$3.21B
Cost of Revenue$27.18M
Gross Profit$3.18B
Operating Expenses$3.02B
Operating Income$182.59M
Interest Expense$36.99M
Net Income$121.67M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)335.08M
Shares Outstanding (Diluted)338.08M

Key Highlights

  • 1Total revenue increased by 34.2% to $3.21 billion for Q2 2016 compared to Q2 2015, heavily influenced by the GWS acquisition contributing $690.3 million.
  • 2Net income attributable to CBRE Group, Inc. decreased slightly to $121.7 million in Q2 2016 from $125.0 million in Q2 2015.
  • 3Cost of services as a percentage of revenue rose to 70.3% from 62.2% in the prior year quarter, primarily due to the GWS acquisition's cost structure.
  • 4The EMEA segment experienced a significant revenue increase of 64.2% driven by the GWS acquisition, though it also saw higher cost of services as a percentage of revenue.
  • 5Foreign currency translation had a negative impact on revenue, particularly due to the weakening British pound sterling.
  • 6The company has $2.6 billion available under its $2.8 billion revolving credit facility, indicating strong liquidity.
  • 7The report highlights ongoing cost-elimination projects aimed at enhancing future margins.

Frequently Asked Questions

The primary driver was the acquisition of Johnson Controls' Global Workplace Solutions (GWS) business, completed in September 2015. This acquisition contributed substantially to revenue across all segments, particularly in the Americas and EMEA regions.

The slight decrease in net income was primarily due to increased costs associated with integrating the acquired GWS business and expenses related to cost-elimination projects aimed at improving future margins. These higher costs offset some of the revenue gains.

Foreign currency fluctuations, especially the weakening of the British pound sterling against the U.S. dollar, had a negative impact on reported revenue and operating results. The company actively uses derivative instruments to mitigate some of this risk.

CBRE Group, Inc. maintains a strong liquidity position with $2.6 billion available under its $2.8 billion revolving credit facility. The company believes its internally generated cash flow and credit facility are sufficient to meet its working capital and funding requirements.